Morningstar

Ebos Group Ltd EBO

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Stock XNZE Rating as of
NZD 36.25 −0.32 (0.88%)
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As of Delayed Price Open

Company Report

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Ebos Earnings: Shares Are Expensive as Margin Pressure Mounts

Shane Ponraj

Narrow-moat Ebos reported fiscal 2024 revenue of AUD 13.2 billion and underlying EBITDA of AUD 624 million, up 8% and 7% respectively, in line with our expectations. The result was driven by acquisitions and 12% revenue growth in Ebos’ institutional segment due to growth in its hospitals and medical technology businesses. We maintain our fair value estimate of AUD 28.50 (NZD 31.50), and our long-term earnings estimates are broadly unchanged. Our fiscal 2025 underlying EBITDA forecast of AUD 583 million is within management’s guidance range of AUD 575 million to AUD 600 million. Shares remain overvalued with earnings set to rebase lower following its Chemist Warehouse contract ceasing at fiscal 2024 year-end.

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Price vs Fair Value

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EBO is trading at a 794% premium.
Price
NZD 36.57
Fair Value
NZD 18.60
Uncertainty
Medium
1-Star Price
NZD 61.98
5-Star Price
NZD 69.38
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

None of the competitors can replicate Ebos’ combined scale across community pharmacy and institutional drug distribution and as a result we believe its relative cost advantage should persist.

Bears

The large holding by the Sybos Group provides an overhang as its sale would likely put downward pressure on the share price.

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Trading Information

Previous Close Price
NZD 36.57
Day Range
NZD 35.91–36.59
52-Week Range
NZD 31.02–38.60
Bid/Ask
NZD 36.23 / NZD 36.28
Market Cap
NZD 7.06 Bil
Volume/Avg
18,142 / 141,415

Key Statistics

Price/Earnings (Normalized)
23.01
Price/Sales
0.49
Dividend Yield (Trailing)
3.24%
Dividend Yield (Forward)
3.36%
Total Yield
3.24%

Company Profile

Ebos is the largest pharmaceutical wholesaler and distributor across Australia and New Zealand. It services community pharmacies and hospitals, which contribute around 60% and 30% of revenue, respectively. Drug pricing and wholesale margins for PBS medicine are governed by the Australian government’s Pharmaceutical Benefits Scheme, or PBS. Wholesale gross margins are capped at 7% for community pharmacy and 10% for hospitals, and ongoing price reform typically results in low-single-digit revenue growth. Aside from pharma distribution, Ebos operates an animal health product wholesale, manufacturing and retail business, as well as undertaking third party logistics services. These segments are smaller contributors to group revenue but due to the unregulated nature are higher-margin operations.
Sector
Healthcare
Industry
Medical Distribution
Stock Style Box
Mid Value
Total Number of Employees
5,000
Website
https://www.ebosgroup.com

Competitors

Valuation

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Metric
EBO
SIG
CAH
Price/Earnings (Normalized)
 23.016.9914.62
Price/Book Value
 2.642.53—
Price/Sales
 0.490.510.12
Price/Cash Flow
 18.47—11.98
Price/Earnings
EBO
SIG
CAH

Financial Strength

Metric
EBO
SIG
CAH
Quick Ratio
 0.551.170.48
Current Ratio
 0.951.740.98
Interest Coverage
 4.720.5824.55
Quick Ratio
EBO
SIG
CAH

Profitability

Metric
EBO
SIG
CAH
Return on Assets (Normalized)
 4.51%−0.12%4.13%
Return on Equity (Normalized)
 12.50%−0.23%—
Return on Invested Capital (Normalized)
 9.38%0.19%109.00%
Return on Assets
EBO
SIG
CAH

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